CIRCOR International, Inc. (NYSE: CIR), a leading provider of
valves and other highly engineered products for markets including
oil & gas, power generation and aerospace & defense, today
announced financial results for the first quarter ended March 30,
2014.
First-Quarter 2014 Highlights
- Revenue grew 3%
- Adjusted operating margin increased 230
basis points to 9.4%
- Adjusted EPS grew 50% to $0.78
(including $0.03 from foreign currency)
- Free cash flow was $14.4 million, 98%
of net income
- Announcing growth investment funded by
restructuring G&A
“CIRCOR began 2014 with strong first-quarter operating results,”
said Scott Buckhout, CIRCOR President and Chief Executive Officer.
“Our margin expansion initiatives continued to gain traction with
adjusted operating margins up year-over-year by 230 basis points to
9.4%. Margins improved across most of our businesses. We had strong
sales growth in our upstream markets, particularly in our large
international projects business and our instrumentation and
sampling business.”
“Q1 order intake was down over last year primarily due to orders
from our project businesses, which can vary significantly from
quarter to quarter. We remain bullish on our energy end markets and
expect solid order intake for the full year,” said Buckhout.
“Today we are announcing an investment program to accelerate
organic growth. We intend to invest approximately $7 million to
increase the size our sales force in growing markets, open
international sales offices in Brazil and Malaysia, and increase
our investment in new products. These actions will be entirely
funded with a reduction in G&A expenses and the closure of
three small facilities,” concluded Buckhout.
Second-Quarter 2014 GuidanceFor the second quarter of
2014, the Company expects:
- Revenues in the range of $220 million
to $230 million;
- Adjusted earnings per share, excluding
special charges, in the range of $0.88 to $0.94; and,
- Restructuring related costs of
approximately $5 million to $6 million.
Selected Consolidated Results
(In millions, except percents and bps) Q1 2014
Q1 2013 Change Revenue
$
211.2 $ 205.4 3% Adjusted Operating Income
$
19.8 $ 14.5 36% Adjusted Operating Margin
9.4% 7.1%
230 bps Adjusted Earnings Per Share (Diluted)
$ 0.78
$ 0.52 50% Orders
$ 199.9 $ 226.8 (12)% Backlog
$ 448.3 $ 457.3 (2)% Free Cash Flow
$
14.4 $ 1.1 -
Note: These amounts exclude special recoveries and charges.
Refer to reconciliation to commonly used US GAAP terms.
Segment Results
(In millions, except percents and bps) Q1 2014
Q1 2013 Change Energy
Revenue
$ 162.6 $ 157.1 3% Adjusted Operating
Margin
13.8% 10.8% 300 bps Orders
$ 159.5 $
173.5 (8)% Backlog
$ 283.1 $ 274.4 3%
Aerospace & Defense Revenue
$ 48.6 $ 48.3
1% Adjusted Operating Margin
9.1% 5.9% 320 bps Orders
$ 40.4 $ 53.3 (24)% Backlog
$ 165.2 $
182.9 (10)%
Note: These amounts exclude special recoveries and charges.
Refer to reconciliation to commonly used US GAAP terms.
Conference Call Information
CIRCOR International will hold a conference call to review its
financial results today, April 22, 2014, at 10:00 a.m. ET. To
listen to the conference call and view the accompanying
presentation slides, visit “Webcasts & Presentations” in the
“Investors” section of the CIRCOR website. The call also can be
accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast
will be archived for one year on the Company’s website.
Use of Non-GAAP Financial MeasuresAdjusted net income,
adjusted earnings per diluted share, adjusted operating income,
adjusted operating margin, and free cash flow are non-GAAP
financial measures and are intended to serve as a complement to
results provided in accordance with accounting principles generally
accepted in the United States. CIRCOR believes that such
information provides an additional measurement and consistent
historical comparison of the Company’s performance. A
reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP measures is available in this news
release.
Safe Harbor StatementThis press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Reliance should not be
placed on forward-looking statements because they involve unknown
risks, uncertainties and other factors, which are, in some cases,
beyond the control of CIRCOR. Any statements in this press release
that are not statements of historical fact are forward-looking
statements, including, but not limited to, those relating to
CIRCOR’s future performance, including second-quarter revenue and
earnings guidance and estimated total annualized pre-tax savings
from restructuring actions. Actual events, performance or results
could differ materially from the anticipated events, performance or
results expressed or implied by such forward-looking statements.
BEFORE MAKING ANY INVESTMENT DECISIONS REGARDING OUR COMPANY, WE
STRONGLY ADVISE YOU TO READ THE SECTION ENTITLED "RISK FACTORS" IN
OUR MOST RECENT ANNUAL REPORT ON FORM 10-K AND SUBSEQUENT REPORTS
ON FORMS 10-Q, WHICH CAN BE ACCESSED UNDER THE "INVESTORS" LINK OF
OUR WEBSITE AT WWW.CIRCOR.COM. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
About CIRCOR International, Inc.CIRCOR International,
Inc. designs, manufactures and markets highly engineered products
and sub-systems for markets including oil & gas, power
generation and aerospace & defense. With more than 7,000
customers in over 100 countries, CIRCOR has a diversified product
portfolio with recognized, market-leading brands that fulfill its
customers’ unique application needs. The Company’s strategy is to
grow organically and through complementary acquisitions; simplify
CIRCOR’s operations; achieve world class operational excellence;
and attract and retain top industry talent. For more information,
visit the Company’s investor relations website at
http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF
INCOME
(in thousands, except share
data)
UNAUDITED
Three Months Ended March 30, 2014
March 31, 2013 Net revenues $ 211,186 $ 205,398 Cost of
revenues 146,548 145,549 GROSS PROFIT 64,638 59,849 Selling,
general and administrative expenses 44,888 45,571 Special
(recoveries) charges, net (1,157 ) 1,378 OPERATING INCOME 20,907
12,900 Other (income) expense: Interest expense, net 918 787
Other (income) expense, net (468 ) 612 TOTAL OTHER EXPENSE, NET 450
1,399 INCOME BEFORE INCOME TAXES 20,457 11,501 Provision for
income taxes 5,825 3,592 NET INCOME $ 14,632 $ 7,908
Earnings per common share: Basic $ 0.83 $ 0.45 Diluted $ 0.82 $
0.45 Weighted average number of common shares outstanding: Basic
17,620 17,511 Diluted 17,741 17,529 Dividends paid per common share
$ 0.0375 $ 0.0375
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(UNAUDITED)
Three Months Ended March 30, 2014
March 31, 2013
OPERATING ACTIVITIES Net income $ 14,632 $ 7,908
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation 4,069 4,009 Amortization 786 758
Compensation expense of share-based plans 1,830 1,028 Tax effect of
share-based plan compensation (571 ) (285 ) (Gain) loss on disposal
of property, plant and equipment 34 (66 ) Changes in operating
assets and liabilities: Trade accounts receivable, net (9,952 )
(2,455 ) Inventories, net 234 (6,461 ) Prepaid expenses and other
assets (859 ) (827 ) Accounts payable, accrued expenses and other
liabilities 6,854 2,198 Net cash provided by
operating activities 17,057 5,807
INVESTING
ACTIVITIES Additions to property, plant and equipment (2,670 )
(4,707 ) Proceeds from the sale of property, plant and equipment 13
75 Net cash used in investing activities (2,657 )
(4,632 )
FINANCING ACTIVITIES Proceeds from long-term debt
48,029 33,598 Payments of long-term debt (41,781 ) (37,655 )
Dividends paid (670 ) (670 ) Proceeds from the exercise of stock
options 192 1,368 Tax effect of share-based compensation 571
285 Net cash (used in) provided by financing activities
6,341 (3,074 ) Effect of exchange rate changes on cash and
cash equivalents (824 ) (2,207 ) INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 19,917 (4,106 ) Cash and cash equivalents at
beginning of year 102,180 61,738 CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 122,097 $ 57,632 Cash
paid during the year for: Income taxes $ 2,913 $ 1,462 Interest $
677 $ 655
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
UNAUDITED
March 30, 2014
December 31, 2013
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 122,097 $
102,180 Short-term investments 92 95 Trade accounts receivable,
less allowance for doubtful accounts of $2,543 and $2,449,
respectively 154,821 144,742 Inventories, net 199,200 199,404
Prepaid expenses and other current assets 20,496 19,815 Deferred
income tax asset 17,566 17,686 Total Current Assets 514,272
483,922 PROPERTY, PLANT AND EQUIPMENT, NET 106,455 107,724
OTHER ASSETS: Goodwill 75,999 75,876 Intangibles, net 34,924 35,656
Deferred income tax asset 17,167 18,579 Other assets 5,140
4,893 TOTAL ASSETS $ 753,957 $ 726,650 LIABILITIES AND
SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 83,391
$ 70,589 Accrued expenses and other current liabilities 56,710
57,507 Accrued compensation and benefits 25,191 31,289 Income taxes
payable 4,946 3,965 Notes payable and current portion of long-term
debt 10,519 7,203 Total Current Liabilities 180,757
170,553 LONG-TERM DEBT, NET OF CURRENT PORTION 45,614 42,435
DEFERRED INCOME TAXES 9,217 9,666 OTHER NON-CURRENT LIABILITIES
25,768 27,109 CONTINGENCIES AND COMMITMENTS SHAREHOLDERS’ EQUITY:
Common stock
176
176
Additional paid-in capital 272,202 269,884 Retained earnings
217,045 202,930 Accumulated other comprehensive gain, net of taxes
3,178 3,897 Total Shareholders’ Equity 492,601
476,887 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 753,957
$ 726,650
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended March 30, 2014
March 31, 2013 ORDERS (1) Energy $
159.5 $ 173.5 Aerospace & Defense 40.4 53.3 Total orders
$ 199.9 $ 226.8
BACKLOG (2) March 30,
2014 March 31, 2013 Energy $ 283.1 $ 274.4
Aerospace & Defense 165.2 182.9 Total backlog $ 448.3
$ 457.3
Note 1: Orders do not include the foreign
exchange impact due to the re-measurementof customer order backlog
amounts denominated in foreign currencies.
Note 2: Backlog includes all unshipped customer orders.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except earnings per
share)
UNAUDITED
2013 2014 1ST QTR
2ND QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR NET REVENUES
Energy $ 157,104 $ 173,557 $ 167,660 $ 162,649
$ 660,970 $ 162,587 Aerospace & Defense 48,294
50,087 47,071 51,386
196,838 48,599 Total $ 205,398 $ 223,644 $
214,731 $ 214,035 $ 857,808 $ 211,186
ADJUSTED OPERATING
MARGIN Energy 10.8 % 13.3 % 15.2 % 17.1 % 14.1 % 13.8 %
Aerospace & Defense 5.9 % 11.4 % 12.1 %
8.4 % 9.5 % 9.1 % Segment operating margin 9.6 % 12.9
% 14.5 % 15.0 % 13.0 % 12.7 % Corporate expenses (2.6 )%
(2.9 )% (3.4 )% (3.5 )% (3.1 )% (3.4 )%
Adjusted operating margin 7.1 % 10.0 % 11.1 % 11.6 % 9.9 % 9.4 %
Restructuring inventory charges 0.1 % (0.1 )% — % 0.3 % 0.1 % — %
Impairment charges — % — % — % 3.2 % 0.8 % — % Special (recoveries)
— % — % (1.5 )% — % (0.4 )% (1.1 )% Special charges 0.7 %
1.0 % 1.4 % 2.4 % 1.4 % 0.5 % Total
GAAP operating margin 6.3 % 9.1 % 11.1 % 5.6 %
8.1 % 9.9 %
2013
2014 1ST QTR 2ND QTR 3RD
QTR 4TH QTR TOTAL 1ST
QTR ADJUSTED OPERATING INCOME Energy $ 16,940 $ 23,114 $
25,441 $ 27,809 $ 93,304 $ 22,462 Aerospace & Defense 2,864
5,724 5,705 4,342
18,635 4,426 Segment operating income
19,804 28,838 31,146 32,151 111,939 26,888 Corporate expenses
(5,277 ) (6,570 ) (7,400 ) (7,400 )
(26,646 ) (7,137 ) Adjusted operating income 14,528 22,268
23,746 24,751 85,293 19,750 Restructuring inventory charges 250
(242 ) — 638 646 — Impairment charges — — — 6,872 6,872 — Special
(recoveries) — — (3,151 ) — (3,151 ) (2,243 ) Special charges 1,378
2,254 2,961 5,160
11,752 1,086 Total GAAP operating
income 12,900 20,256 23,936
12,081 69,174 20,907
INTEREST EXPENSE, NET (787 ) (838 ) (745 ) (792 ) (3,162 ) (918 )
OTHER (EXPENSE) INCOME, NET (612 ) (626 ) (568 )
(167 ) (1,974 ) 468 PRETAX INCOME
11,501 18,792 22,623 11,122 64,038 20,457 PROVISION FOR INCOME
TAXES (3,592 ) (6,124 ) (4,903 ) (2,297 )
(16,916 ) (5,825 ) EFFECTIVE TAX RATE 31.2 % 32.6 %
21.7 % 20.7 % 26.4 % 28.5 %
NET INCOME $ 7,908
$ 12,668 $ 17,720 $ 8,825
$ 47,121 $ 14,632 Weighted Average Common
Shares Outstanding (Diluted) 17,529 17,607 17,667 17,710 17,629
17,741
EARNINGS PER COMMON SHARE (Diluted) $ 0.45
$ 0.72 $ 1.00 $ 0.50
$ 2.67 $ 0.82
ADJUSTED EBITDA $
18,682 $ 26,419 $ 27,850
$ 29,441 $ 102,392 $ 27,387
ADJUSTED EBITDA AS A % OF SALES 9.1 % 11.8 %
13.0 % 13.8 % 11.9 % 13.0 %
CAPITAL
EXPENDITURES $ 4,707 $ 4,100 $ 4,772 $ 3,749 $ 17,328 $ 2,670
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE
MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
TERMS
(in thousands, except earnings per
share)
UNAUDITED
2013 2014 1ST QTR
2ND QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR FREE CASH FLOW AS % OF NET
INCOME 14 % 75 %
167 % 167 % 116
% 98 % FREE CASH FLOW $
1,100 $ 9,525 $ 29,557 $
14,696 $ 54,878 $ 14,387 ADD:
Capital Expenditures 4,707 4,100 4,772
3,749 17,328 2,670
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,807 $
13,625 $ 34,329 $ 18,445
$ 72,206 $ 17,057
NET DEBT (CASH)
$ 8,814 $ (1,376 ) $
(36,466 ) $ (52,637 ) $
(52,637 ) $ (66,056 ) ADD: Cash
& Cash Equivalents 57,633 60,831 86,285 102,180 102,180 122,097
Investments 99 96 98 95
95 92 TOTAL DEBT $ 66,546
$ 59,551 $ 49,917 $ 49,638
$ 49,638 $ 56,133
DEBT AS %
OF EQUITY 16 % 14 % 11
% 10 % 10 % 11 %
TOTAL DEBT 66,546 59,551 49,917
49,638 49,638 56,133
TOTAL SHAREHOLDERS' EQUITY 418,819 432,151
459,058 476,887 476,887
492,601
2013 2014 1ST
QTR 2ND QTR 3RD QTR 4TH
QTR TOTAL 1ST QTR ADJUSTED
OPERATING INCOME $ 14,528 $ 22,268
$ 23,746 $ 24,751 $
85,293 $ 19,750 LESS: Inventory restructuring
charges 250 (242 ) — 638 646 — Impairment charges — — — 6,872 6,872
— Special (recoveries) — — (3,151 ) — (3,151 ) (2,243 ) Special
charges 1,378 2,254 2,961
5,160 11,753 1,086 OPERATING
INCOME $ 12,900 $ 20,256 $ 23,936 $ 12,081 $ 69,173 $ 20,907
ADJUSTED NET INCOME $ 9,043 $
14,044 $ 16,439 $ 16,773
$ 56,299 $ 13,916 LESS: Inventory
restructuring charges, net of tax 174 (165 ) — 396 405 — Impairment
charges, net of tax — — — 4,261 4,261 — Special (recoveries), net
of tax — — (3,151 ) — (3,151 ) (1,391 ) Special charges, net of tax
961 1,541 1,870 3,291
7,663 675 NET INCOME $ 7,908
$ 12,668 $ 17,720 $ 8,825
$ 47,121 $ 14,632
ADJUSTED
EARNINGS PER SHARE $ 0.52 $ 0.81
$ 0.93 $ 0.95 $ 3.21
$ 0.78 LESS: Inventory restructuring charges, net of
tax 0.01 (0.01 ) — 0.02 0.02 — Impairment charges, net of tax — — —
0.24 0.24 — Special (recoveries), net of tax — — (0.18 ) — (0.18 )
(0.08 ) Special charges, net of tax 0.06 0.10
0.11 0.19 0.46
0.04 EARNINGS PER COMMON SHARE (Diluted) $ 0.45
$ 0.72 $ 1.00 $ 0.50
$ 2.67 $ 0.82
2013
2014 1ST QTR 2ND QTR 3RD
QTR 4TH QTR TOTAL 1ST
QTR EBITDA $ 17,054 $ 24,407
$ 23,368 $ 11,914 $
86,272 $ 26,230 LESS: Interest expense, net
(787 ) (838 ) (745 ) (792 ) (3,162 ) (918 ) Depreciation (4,009 )
(4,026 ) (3,908 ) (4,091 ) (16,034 ) (4,069 ) Amortization (758 )
(751 ) (764 ) (766 ) (3,039 ) (786 ) Provision for income taxes
(3,592 ) (6,124 ) (4,903 ) (2,297 )
(16,916 ) (5,825 ) NET INCOME $ 7,908 $ 12,668
$ 17,720 $ 8,825 $ 47,121
$ 14,632
ADJUSTED EBITDA $
18,682 $ 26,419 $ 27,850
$ 29,441 $ 102,392 $
27,387 Inventory restructuring charges (250 ) 242 — (638 )
(646 ) — Impairment charges — — — (6,872 ) (6,872 ) — Special
(recoveries) — — 3,151 — 3,151 (2,243 ) Special charges (1,378 )
(2,254 ) (2,961 ) (5,160 ) (11,753 ) 1,086 Interest expense, net
(787 ) (838 ) (745 ) (792 ) (3,162 ) (918 ) Depreciation (4,009 )
(4,026 ) (3,908 ) (4,091 ) (16,034 ) (4,069 ) Amortization (758 )
(751 ) (764 ) (766 ) (3,039 ) (786 ) Provision for income taxes
(3,592 ) (6,124 ) (4,903 ) (2,297 )
(16,916 ) (5,825 ) NET INCOME $ 7,908 $ 12,668
$ 17,720 $ 8,825 $ 47,121
$ 14,632
CIRCOR INTERNATIONAL,
INC.
RECONCILIATION OF FUTURE PERFORMANCE
MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING
PRINCIPLE TERMS
UNAUDITED
2nd Quarter 2014 Low High
REVENUE (in millions) $ 220 $
230 EXPECTED ADJUSTED EARNINGS PER SHARE
(DILUTIVE) $
0.88
$
0.94
LESS: Restructuring related charges,
Special charges
$
0.25
$
0.21
EXPECTED EARNINGS PER COMMON SHARE
(Diluted)
$
0.63
$
0.73
Note: Assumes 26% - 27% tax rate and
exchange rates at present values.
CIRCOR InternationalRajeev Bhalla, 781-270-1200Executive Vice
President & Chief Financial Officer
CIRCOR (NYSE:CIR)
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